Henry McVey of KKR wrote about austerity in Europe and noted how
fiscal austerity in the form of deficit reduction was slamming
GDP growth:

Fourth, the European fiscal multiplier is now larger than in the
past, which we believe means below-consensus growth in the region
again this year.

Having been to Europe multiple times in 2012 to assess the macro
situation, it has become increasingly clear to me that “this time
is different” when it comes to the relationship between fiscal
contraction (the independent variable) and GDP growth (the
dependent variable). Specifically, over the past twenty
or so years, a one percent contraction in the fiscal deficit
traditionally led to only about a 50 basis point contraction in
GDP5. Today, by comparison, the multiplier in Europe is closer to
1.25-1.75x, we believe (Exhibit 20). As a result,
aggressive monetary policy is less effective in offsetting
current fiscal headwinds. As the exhibits above show, we link a
significant portion of this relationship shift to
excessively high bank leverage as well as some of the
structural rigidities imposed by a common currency.